Studies Of Corporation Contraction And It's Performance Evaluation

Plain talk about corporate reorganization, corporation extension and corporation contraction are actually accreted together. on one side, the buyer intends to extend its capital size by acquisition, on the other side, acquisition is also another way that can help the seller realize its corporation contraction. Besides selling capital property in market, stock repurchasing, spin-off, divestiture, equity carve-out and so on, even include selling its non-core business units, are all of the normal means to implement corporation contraction.The paper will primarily study the corporation contraction that have been used in our country on the basis of analyzing the associated strategy and methods, in order to establish the performance evaluation system of the corporation contraction to regulate the activities that the entities might want to take during this process, and finally improve the efficiency and effectiveness of the resources leaving.The paper consists of five chapters together.Chapter 1, described the target of this paper, the content studied, the methods that guide this study, as well as the structure that leads this research.Chapter 2, explained the theory, methods and motivation that should be covered by the strategy of corporation contraction. It analyzes the general reason of contraction, as well as the theory basis of it. Also, it studies in the effect of using the methods of corporation contraction found that their impacts on the corporate financial performance. To the theory and methods of corporation contraction, this paper clarify the basic definition and meaning of corporation contraction, The methods of corporation contraction include divestiture, spin-off, equity carve-out, stock repurchase, targeted stock, voluntary liquidations, etc.To the motivation of corporation contraction, it is explained in two ways, either to satisfy the business requirement that the operation environment request for, or to satisfy the requirement that the transformation of the enterprise strategy intends to achieve in putting off bad business, reviving capital reserved, adding cash flow, dismissing negative effect and correcting the mistakes those happened during the acquisition.Chapter 3, it studies on the corporate contraction effect analysis and describes the contraction effect from the view of signal of corporate contraction, contraction cost, risk and its value source.The signal of corporate contraction consists of internal signal and external signal. Based on the relationship between request and supply, external signal includes the signal that is on behalf of competition pressure, as well as the signal which represents a descending requirement. As for the internal signal is concerned, it could be distinguished from the view of financial controlling with the characteristics of lacking of real time accounting information exchange, non-effective cash flow forecasting, as well as highly cost that is caused due to weak cost controllingIn addition, this chapter besides describes the cost of corporate contraction by standing in the shoes of direct cost, indirect cost, business cost, as well as immaterial cost respectively. It also explains the risk and value source that is embedded in the process of corporation contraction.Furthermore, it firstly highlights that the analysis of contract effect should also be conducted by standing in the shoes of shareholder and creditor of the enterprise, then points out the influence that the entity controlling power, cash flow and tax might bring to the effect of corporation contractChapter 4, describe the construction of corporate contraction performance system based on the above subjects, which have been explained already.It firstly focuses on the basic theory of the corporate contraction, such as the significance of the performance system, main targets this system related to, and key principles that this system is based on.Also, points to the content of the performance system, chapter 4 implements a comprehensive analysis that covers principles of the system design, requirement of the performance system, and standard of the performance metrics.Chapter 5, indicates the trend, as well as the suggestions about the application of corporate contraction within the enterprises of our country. But this just based on case researches, their performance will be researched further and be studied on the whole when they will be used widely in the future. It highlights that enterprise should choose the right way to conduct the corporation contraction with the considering of its actual operation, and should also establish an effective performance judgment system during the process of corporate contraction.At last, the main contributions of this paper puts forward are to describe the theory of corporation contraction, and explore the new way to construct an effective performance system by combing with non-financial metrics with financial index together. With the development of this performance system, it could help the corporation contraction methods to be applied and develop in health.Of course, although the thesis bears the intention to involve more practical and real cases into the description, however, due to the very limited availability of the non-financial index from the enterprise, who is under the process of corporation contraction, most of the descriptions that this article provides inside are supported with basic but theorization definition.